Off-site Manufacture for Construction (Science and Technology Committee Report)

Lord Stevenson of Balmacara Excerpts

Wednesday 12th December 2018 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I declare an interest: my wife is a senior lawyer whose specialism is in construction. We have been so busy in the past few weeks that I have not had a chance to discuss with her anything in this report, so anything I say is entirely my fault and she must not be blamed for it.

I thank the noble Lord, Lord Patel, for introducing the report, which he did in his usual style and picked up the key points. The committee has obviously worked extremely hard. It has been a harmonious and interesting group and its members have been able to turn that enthusiasm and interest into good-quality speeches today. A number of them have been able to add to and embellish their contributions by bringing in their specialist subjects. I had forgotten about the local interest of the noble Lord, Lord Broers, in nuclear power and I cannot wait for the forthcoming Question. I shall have to follow my noble friend Lady Young and look harder for my inner tree the next time I am under stress in relation to these issues.

Joking apart, this is an interesting report of which the House can be proud. It is an example of the kind of activity that goes on—day in, day out—in your Lordships’ House but rarely sees the light of day in the way we all want it to do. The report is obviously based on substantial evidence collection. Anybody who is anybody in the construction world seems to have appeared—either in person or in writing—in front of the committee. It is clear that it has hit a particular moment in the thinking, debate and discussion in the public sphere around this area, which has encouraged the Government to give their support. I have done a number of committee reports over the years but I do not think I have read a government response that has been as broadly supportive of what the committee has reported, even though, as the noble Lord said, it does not go quite as far as you think it is going. The words are warm but the actions do not quite match up to where the committee would want.

Construction is an interesting area because, as a number of noble Lords have said, it is a key sector of the economy. It is often used by Chancellors of the Exchequer as a way of signalling whether the economy is going forward or is in a contracting phase. It has a direct relationship to employment so it is important in its own right. As others have said, it has a long value chain right across the country so, in a sense, by looking at construction you are also looking at the way in which Britain operates.

It is good that construction has been selected to be a key part of the industrial strategy. It has all the right hallmarks in volume, size and how it operates. However, it suffers in many ways, although that is not its own fault because it is at the cusp of what might happen to many sectors of our economy during the fourth industrial revolution. Will it benefit from the digital revolution or is it going to suffer? Is it going to use the digital revolution to create innovations in productivity and change the way it works? Is it going to rethink its approach to investment cycles? Other noble Lords have mentioned these points.

Construction is also interesting because it reflects much of what we call the British disease in what we do—appalling productivity despite hard work and long hours; short-term investment cycles; no big strong companies being built out of family companies and developing into publicly quoted companies; terrible R&D; and underskilling throughout. As has been mentioned, it is not a diverse environment; it is not investing in itself; and profit-taking is far too obvious and far too often. The relative number of SMEs, particularly at the bottom of the chain, is too great for the overall system and that leads to problems in innovation. It is a problem area at a macro level. I have mentioned diversity but we must not forget the recent blacklisting saga. It is not carbon neutral and it does not have an effective way of communicating to government about what it does—or, at least, until recently, there were no authoritative voices.

However, there are pluses. Despite considerable efforts by the department and by the Government more generally, the Construction Industry Training Board is a model of the kind of things that can go on in British industry and it should be praised for having survived and doing good work. Interestingly, the department for the construction industry—I hope the Minister will confirm this when he comes to respond—was one of the few to have a tsar for a number of years. This started the department thinking about what was necessary to create the particular recommendations we have seen today.

There are some good things, but there are quite a lot of bad things. The good news is that the report deals very clearly with a lot of issues that needed to be addressed and in a way that should provide a template for future results. I only have a few points on the main report, as people have talked so well about the individual recommendations. For reasons relating to my general argument, I would like to pause for a second on the safety issue, which was raised by a number of people.

This industry cannot be proud of its work on safety in the past, but it has improved and what has been proposed here—this change of culture and operations—may bring a better safety record. That is interesting because, as we have learned in recent weeks and months, health and safety is a British example of approaching problems of public interest that have not been susceptible to a top-down approach. The precautionary principle which infuses all our health and safety work—with the regulator placing more emphasis on analysing the harms and working with the industry to build a sustainable, resilient solution—is the way forward on many of our regulatory issues. This has been done well here and I hope it does not lose out as a result of the change in culture and practice we have been talking about. We should never forget the dangers omnipresent in construction activity.

On the supply side, the report does a good job by raising the issue of how the new technologies, approach and arrangements will work in terms of consumer satisfaction, and wants the Government to move further in what they are doing here. Mortgages are the obvious part of that, but insurance is also an issue. The report generated a response from the Government about the Farmer group, which reports to the Housing Minister in another department, but which is also part of the workstreams affected by the Minister’s response. I hope he will be able to say more about that. The whole question about developing housing will not work unless there is finance to support those who wish to move. The group started in December 2017, so it has had a year. Perhaps the Minister can give us an update on where that is going when he comes to respond, because it seems absolutely crucial.

In the same vein, the housing shortage issue—which the report picks up well in paragraph 55—can be resolved only if the Government think about the finance required for development more generally. The £3 billion homebuilding fund is obviously a way forward, but it is a sort of elephant in the room, because the number is so extraordinarily large and the methods by which it will be achieved are so difficult to understand. I hope the department will not give up on this. Again, the Minister cannot speak to this departmental responsibility, but I hope he will take the message from the report back to his colleagues in government. The presumption in favour and the idea that all this will pull together to create the right road will not work unless financing is provided at the appropriate time to feed the machine when it gets going.

There are several good recommendations in paragraphs 80 and 81 onwards, and later in the report, about the skills revolution required, how the leadership of the Construction Leadership Council should be approached, the good work done in apprenticeship standards and the move towards T-levels, and the hope this will also read across to digital skills. As others have said, this is fine, but we have been here before. Good advice and ideas from industries often do not see the light of day because they flow into the different departments providing support, such as the Department for Education, and then never seem to happen. I hope the Minister can say more about where we are with that, and how we will get some purchase with it.

Relating to the apprenticeship scheme, a number of people mentioned the problem of the particularity of the industry. This is not unique to construction; the same problem appears in other industries which have lots of small companies and very few big companies, because the money taken from the larger companies does not naturally flow within the sector. The Government will need to think quite hard about this when they respond. The history of the Construction Industry Training Board, as I understand it, has been one of trying to work with the industry as it found it to create the sort of skills and training courses that worked for that industry. Simply bolting on a pan-industry apprenticeship scheme may not be the right solution here. As in the audio-visual industry—where there are very few apprentices because they are not the particular need of that industry—the Government need to be smarter on their feet and better able to respond to the way in which the industry is signalling it wants the money that has been taken out to be paid back in training. The same issue is raised here.

There is much in the report about the need for better industry co-ordination, and the response from industry has already been quite good. The need for measurable targets, for a systematic approach to looking at that and for the publication of results is crucial. I hope there will be more on that. There are good, soft words, but no real direction as to where it is going, and how the Government might use the measurement of these important indicators.

On the second side of that same coin of industry co-ordination, how on earth are we going to educate clients to be better users of the industry in its new formulation? I am sure that everyone in this House has been a client at some stage in a large project in a business capacity, and has realised how difficult it is to try and get the communication, dialogue and debate that will result in a good product. Part of that is because we, as ordinary individuals, come into this so rarely. Because we are not trained for it, we do not have the skills and exercise. This has particular bite in relation to the Government, who are a huge procurer of buildings and spend enormous sums of money every year. Up until recently, the skill set required to run and manage a big project was never present, and rarely bought in. Of course, any learning that did take place was lost because people move quickly on to other jobs and practices. I am glad to hear from senior colleagues in the Civil Service that there have been some very substantial changes in the quality of skills in people brought into the Civil Service to do this work properly. I would be grateful if the Minister could reflect on that when he responds, because it is a necessary condition.

The last thing I want to cover concerns productivity. The issues here have again been well analysed in the report, and—in terms of what it is—the government response is good. But it does not yet provide the answer to the productivity puzzle that we are trying to solve. As the noble Lord, Lord Mair, said, it may be a question of trying to ensure that waste is reduced; that better value-for-money measures are put in place; and that skills and training are raised. But there needs to be another piece of work done by the Government to try and indicate how they see the productivity puzzle being resolved, and to make sure that all concerned buy into it in a way which will be effective.

My concluding feeling about this report, although it is not an area in which I am in any sense an expert, is that there is enough here to give real hope that we have within our grasp a solution to some of the problems we have been confronting in the construction industry. The Government’s adoption of a presumption in favour of off-site building is a terrific step forward, but it needs to be really pushed and supported. The Government have a role here; they have to look very seriously at the issues that have been raised, and I hope we will get some words from the Minister on that when he comes to respond.

Finally, as the noble Lord, Lord Fox, said, that is most of the story but not all of it. There are other issues that we need to think about if this will be successful—perhaps another committee, perhaps the Government need to go back to this when doing their return. The planning constraints issue is not resolved by the exchange between the noble Lord, Lord Fox, and others. There is an issue about import substitution; why do we have to import so many of the materials used in construction? Why can we not provide better skill sets, better investment and a better approach to try and make things here? The materials which we are using are part of that whole narrative. If they all need to be brought in from outside—even before Brexit—this would be a terrific chance to do more ourselves.